Some Much-Needed Truths About Lehman

I have not yet finished David Wessel's In Fed We Trust: Ben Bernanke's War on the Great Panic -- mostly because -- full disclosure -- I'm scribbling away on my own book: The Great Mistake: The Fall of Lehman Brothers and the Weekend That Changed The World for John F Wiley & Sons, due this Winter.

However, there are things expressed in the review of Wessel's book by Robert Teitelbaum that, I know from my own research into the reasons why Lehman fell, need to be addressed -- fast, before they seep into the consciousness of the reading public as fact.

Both Wessel's book and the far more risible account of Lehman's demise by Lawrence McDonald, which is a misleading-bordering-on-hallucinatory account of what happened, contain certain key errors.

1. Hank Paulson did not dislike Dick Fuld. Quite the contrary.
2. Teitelbaum's take on Wessel: "When Paulson finally decides the government can't save Lehman, the decision remains opaque. He mentions politics and Moral Hazard. But Wessel has already slyly suggest that perhaps his disdain for Lehman fed the decision."
3. This is also not true. Nobody tried harder to save Lehman Brothers than Hank Paulson and his team at Treasury.
4. Hank Paulson did not, as Teitlelbaum summarizes Wessel, "fail to understand the implications of Lehman's failure." Possibly, other people did. Read my book to see who.
5. Dick Fuld was not uninvolved in Lehman's negotiations with KDB, the Korean bank. Anyone who knows the slightest thing about Dick Fuld's character would know that he would never let Lehman engage in major merger talks without inserting himself into the process.

Finally, apologies for being so opaque myself. But I cannot stand to let these inaccuracies enter the public realm without resistance! I will hurry up and write my book which tells a rather different story.

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Comments

[Yvette Kantrow - Huffpost Blogger]

Can you please link to Bob's post on The Deal.com
http://www.thedeal.com/dealscape/2009/08/david_wessel_on_the_failure_of.php

[TheLastWallStreeter]

Not sure on your first point - I've met both people and Fuld's character is about as opposite of Paulson's as you can get, plus Fuld is as abrasive as h.e.l.l.

The blame for Lehman's failure should lie squarely on Fuld - he was the one so worried about playing with the big boys that he over-leveraged more than anyone else and wouldn't take two white offers for capital infusions when he was offered.

Paulson had no one to sell Lehman to. The only bank with the wherewithal and the interest was Lewis, but Thain sideswiped him and got Lewis a prize he had coveted for years. Though Paulson wanted BofA to buy Lehman he was thankful to have Merrill saved, which if it collapsed would have been far far more damaging.

[Henry]

In your book you should not fail to describe in balance sheet numbers the juxtaposition between AIG and Lehman. AIG was saved by the government, Lehman was not. You state that nobody tried harder to save Lehman than Paulson. Well... he was the head of the Treasury, eh? He did save AIG but he did let Lehman go. What was value of Lehman. I mean when the asset values were all calibrated by professionals on an up to date basis and the liabilities were subtracted what was the "majic" number of value. I've read that Lehman was a horse that had no trott left. They had no product to peddle. Ergo the value and no entity was interested.

The govt owns something like 80% of AIG. Why not the same deal for Lehman?

[sonofsamphm1c]

Perhaps because they learned something when they let Lehman fall.

Like externalities are a B-word.

[Shortyfuse]

I heard that Bush's cousin was on the board of directors of Lehmans. Is that true? I think I heard it in a Senatorial hearing. That would be something after his brother Neil was behind the Saving and Loan failure.